On 24 April 2024, we published a consultation paper on the review of the cost benefit analysis (CBA) guidelines and application guidelines for its regulatory investment tests (RIT-T & RIT-D) (together the Guidelines review). The consultation paper aims to provide stakeholders with the opportunity to provide informed and targeted input into the process. 

Regulatory investment test

The Australian Energy Market Operator (AEMO) uses a cost benefit analysis in developing the Integrated System Plan (ISP) in its national planning function for the National Electricity Market. The objective of the ISP is to identify the optimal development of the National Electricity Market to facilitate the coordination of network, generation and storage investment to meet projected demand.

The regulatory investment test (RIT) is a cost-benefit test that network businesses must undertake before building electricity network infrastructure. The purpose of this test is to assess a range of credible options that could address an identified need in the electricity network (such as providing stability in the power system), and then identify the credible option that maximises the net economic benefits to all those who produce consume and transport electricity in the National Electricity Market.

Our role

The role of the AER in the transmission and distribution planning framework includes establishing and maintaining the RIT-T (RIT for transmission) and the RIT-D (RIT for distribution) and providing more detailed guidance about the development of the ISP and the application of the RIT-T and RIT-D, through developing relevant guidelines. 

Guidance on the RIT-T for actionable ISP projects is housed in the Cost Benefit Analysis Guidelines and refers to RIT-Ts that are required to be undertaken as directed by AEMO’s most recent ISP. The RIT-T application guidelines apply to projects that are identified outside the ISP. The RIT-D application guidelines apply to proposed distribution investment projects.

While the RIT instruments for transmission and distribution provide the framework for the cost-benefit test, the RIT application guidelines provide guidance on:

• The purpose of RITs and projects subject to assessment.
• The cost benefit assessment required to be undertaken in the RIT, including guidance on the selection of reasonable scenarios, selection of credible options and the preferred option, and treatment of uncertainty risks and externalities.
• The process to follow in applying the RITs by describing the stakeholder consultation steps prescribed in the National Electricity Rules, as well as the process for reapplying a RIT following a material change in circumstances.
• Calculating different classes of market benefits, using worked examples. 
• The dispute resolution process.

In May 2024, we held a series of virtual public forums on the guidelines review. The purpose of these sessions was to provide information on the consultation paper and seek stakeholder feedback.

Stakeholder consultation is a key part of our review process, and we encouraged interested parties to attend the public forums that cover their topics of interest so that we can listen and respond to stakeholder feedback. The forums aimed to assist stakeholders in developing their written submissions.

Details

Valuing emissions reductions

Tuesday 14 May 2024
3:00 pm – 5:00 pm AEST 

Other AEMC rule changes

Thursday 16 May 2024
10:00 am – 12 pm AEST

Social licence expert forum

Monday 20 May 2024
3:30 pm - 5:30 pm AEST

Social licence community forum

Monday 3 June 2024
4:00 pm - 6:00 pm AEST

Slide packs from all held forums and forum summaries are available to view below.

Below are the summaries for each of the stakeholder forums ran during this stage of the consultation process.

We received 13 written submissions to the our positions and questions in the consultation paper. These are listed below.